Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the Chicago Stock Exchange, Incorporated Relating to Tier 1 Listing Standards

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38795; File No. SR-CHX-97-17]

Self-Regulatory Organizations; Notice of Filing of Proposed Rule

Change by the Chicago Stock Exchange, Incorporated Relating to Tier 1

Listing Standards

June 30, 1997.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that

on June 25, 1997, the Chicago Stock Exchange, Inc. (``CHX'' or

``Exchange'') filed with the Securities and Exchange Commission

(``SEC'' or ``Commission'') the proposed rule change as described in

Items I, II, and III below, which Items have been prepared by the self-

regulatory organization. The Commission is publishing this notice to

solicit comments on the proposed rule change from interested persons.

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\1\ 15 U.S.C. 78s(b)(1).

\2\ 17 CFR 240.19b-4.

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I. Self-Regulatory Organization's Statement of the Terms of Substance

of the Proposed Rule Change

The Exchange proposes to amend Article XXVIII, rule 14 of the

Exchange's Rules relating to Tier 1 listing standards. The text of the

proposed rule change is available at the Office of the Secretary, CHX,

and at the Commission.

II. Self-Regulatory Organization's Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule Change

In its filing with the Commission, the self-regulatory organization

included statements concerning the purpose of and basis for the

proposed rule change and discussed any comments it received on the

proposed rule change. The text of these statements may be examined at

the places specified in Item IV below. The self-regulatory organization

has prepared summaries, set forth in Sections A, B, and C below, of the

most significant aspect of such statements.

A. Self-Regulatory Organization's Statement of the Purposes of, and

Statutory Basis for, the Proposed Rule Change

1. Purpose

The National Securities Markets Improvement Act of 1996 \3\ amended

Section 18 of the Securities Act of 1933 \4\ to provide for exclusive

federal registration of securities listed, or authorized for listing,

on the New York Stock Exchange (``NYSE''), the American Stock Exchange

(``Amex'') or listed on the National Market System of the Nasdaq Stock

Market (``Nasdaq/NMS''), or any other national securities exchange

designated by the Commission by rule to have substantially similar

listing standards to those markets. The CHX petitioned the SEC in

February of this year to adopt a rule finding the CHX's Tier 1 listing

standards to be substantially similar to those of the NYSE, Amex or

Nasdaq/NMS. If the SEC adopts such a rule, any security listed on the

CHX under its Tier 1

[[Page 36595]]

standards would be exempt from registration in all fifty states.

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\3\ Pub. L. No. 104-290, 110 Stat. 3416 (1996)

\4\ 15 U.S.C. 77s.

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The SEC has recently published for comment proposed Rule 146(b)

which would designate various exchanges' listing standards as being

substantially similar to those of the NYSE, Amex or Nasdaq/NMS. The SEC

has indicated that it preliminarily believes that the only deficiency

in the CHX Tier 1 standards, which precludes it from designating the

CHX Tier 1 securities as qualifying, is that there is no minimum share

price requirement for continued listing on Tier 1. If such deficiency

was corrected, the SEC indicated that it would consider including CHX's

Tier 1 securities in the final Rule 146(b).

As a result of the above, the CHX is proposing to amend Article

XXVIII, rule 14 of the Exchange rules to add a minimum share price

requirement for continued listing of common stock on Tier 1. The

proposed amendment is virtually identical to Amex's requirement. In

essence, the proposed amendment states that an issuer that has a common

stock listed under Tier 1 that is selling for a substantial period of

time at a low price per share must effect a reverse split within a

reasonable period of time after being notified that the Exchange deems

such action to be appropriate. The proposed amendment then sets forth

examples of pertinent factors which the Exchange will review in

determining whether a reverse split is appropriate. If the issuer fails

to effect a reverse split, then the Exchange would initiate a

proceeding to delist the issuer's common stock from Tier 1.

2. Statutory Basis

The Exchange believes that the proposed rule change is consistent

with Section 6(b)(5) of the Act \5\ in that it is designed to promote

just and equitable principles of trade, to remove impediments to and

perfect the mechanism of a free and open market and a national market

system, and in general, to protect investors and the public interest.

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\5\ 15 U.S.C. 78f(b).

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B. Self-Regulatory Organization's Statement on Burden on Competition

The Exchange does not believe that the proposed rule change will

impose any inappropriate burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed

Rule Change Received From Members, Participants, and Others

No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for

Commission Action

Within 35 days of the publication of this notice in the Federal

Register or within such longer period (i) as the Commission may

designate up to 90 days of such date if it finds such longer period to

be appropriate and publishes its reasons for so finding or (ii) as to

which the self-regulatory organization consents, the Commission will:

(A) By order approve the proposed rule change, or

(b) Institute proceedings to determine whether the proposed rule

change should be disapproved.

IV. Solicitation of Comments

Interested persons are invited to submit written data, views, and

arguments concerning the foregoing. Persons making written submissions

should file six copies thereof with the Secretary, Securities and

Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.

Copies of the submission, all subsequent amendments, all written

statements with respect to the proposed rule change that are filed with

the Commission, and all written communications relating to the proposed

rule change between the Commission and any person, other than those

that my be withheld from the public in accordance with the provisions

of 5 U.S.C. 552, will be available for inspection and copying at the

Commission's Public Reference Room. Copies of such filing will also be

available for inspection and copying at the principal office of the

Exchange. All submissions should refer to File No. SR-CHX-97-17 and

should be submitted by July 29, 1997.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority. \6\

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\6\ 17 CFR 200.30-3(a)(12).

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Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97-17668 Filed 7-7-97; 8:45 am]

BILLING CODE 8010-01-M